Under which of the following scenarios does an increase in the wage tax cause a drop in employment but no deadweight loss?
A. When the wealth effect for workers is larger than the substitution effect.
B. When the wealth effect for workers is smaller than the substitution effect.
C. When the wealth effect for workers is equal to the substitution effect.
D. It is possible under any of these scenarios.
E. There is no scenario under which this is possible.
Answer: E
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One reason why economists often use models in their analysis is that
A) a model helps us to understand, explain, and predict economic phenomena in the real world. B) a model accurately pictures every detail of the real world economy. C) a model relates to individual thought processes rather than behavior. D) it is relatively easy to perfectly specify a model.
Evidence from experiments in which real people play the ultimatum game supports the idea that people
a. are rational wealth-maximizers. b. tend to be driven by fairness, without regard for their own self-interest. c. are driven by both fairness and self-interest. d. have trouble calculating their own levels of wealth.
For a fixed money supply, a higher level of real balances implies
A. a higher price level. B. a lower price level. C. higher velocity of money. D. lower velocity of money.
Congress decided to implement a fiscal policy, but argued for weeks about how to do it. Once they agreed on a plan, the president had to deliberate and consult his cabinet members before signing it. This is an example of ______.
a. an impact lag b. a crowding-out lag c. a recognition lag d. an implementation lag